Sick of spinning your wheels? The markets no longer can. In Spain, the Ibex lost support at 10,000 and analysts are looking for a 5% drop. This made Telefónica cancel the IPO of its subsidiary Atento. And Santander was forced to back half of a debt placement (the debt belongs to local administrations) worth 1 billion euros.
Fear about Spain returns and sows doubts about Bankia and Banca Cívica´s upcoming placements. The US can´t keep spinning either.
Wall Street caved and told Bernanke that it would monitor the bank´s dividend. The Fed is echoing these tensions because the recovered banks have already gotten rich while jobs are still lacking.
Greece can´t keep spinning either. Trichet and the Germans are racing toward a cliff, but everyone knows that Trichet is going to start slowing down because his car doesn´t brake well.
His bluff would derail the euro and it´s assumed that the load of Greek debt is too much and has to be reduced. The European Central Bank´s (ECB) strategy is to let the race last as long as possible by floating more debt for Greece such that bank exposure is reduced at the taxpayers expense.
The ECB asks that some restructuring be voluntary and not to yield to a credit event or non-payment. But right there the line is really thin. Is there freedom to lengthen the term to seven years? The Germans hope to stick it to the creditors and that they don´t go running when they suffer losses. We are going into a bear market full of uncertainties. One has to keep pushing through indebtedness, and this means that the wheels will keep spinning.
